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FIN 534 week 5 quiz 4

FIN 534 week 5 quiz 4

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FIN 534 week 5 quiz 4

Question 1

The Nantell Corporation just purchased an expensive piece of equipment. Assume that the firm planned to depreciate the equipment over 5 years on a straight-line basis, but Congress then passed a provision that requires the company to depreciate the equipment on a straight-line basis over 7 years. Other things held constant, which of the following will occur as a result of this Congressional action? Assume that the company uses the same depreciation method for tax and stockholder reporting purposes.

Question 2

On its 2010 balance sheet, Barngrover Books showed $510 million of retained earnings, and exactly that same amount was shown the following year. Assuming that no earnings restatements were issued, which of the following statements is CORRECT?

Question 3

Which of the following statements is CORRECT?

Question 4

Which of the following statements is CORRECT?

Question 5

Which of the following statements is CORRECT?

Answer

Selected Answer:

A firm can show a large amount of retained earnings on its balance sheet yet need to borrow cash to make required payments.

Question 6

Below is the common equity section (in millions) of Teweles Technology’s last two year-end balance sheets:

2009  2008

Common stock  $2,000 $1,000

Retained earnings  2,000  2,340

Total common equity  $4,000 $3,340

Teweles has never paid a dividend to its common stockholders. Which of the following statements is CORRECT?

Question 7

Which of the following statements is CORRECT?

For most companies, the market value of the stock equals the book value of the stock as reported on the balance sheet.

A typical industrial company’s balance sheet lists the firm's assets that will be converted to cash first, and then goes on down to list the firm's longest lived assets last.

Question 8

Which of the following statements is CORRECT?

Question 9

Aubey Aircraft recently announced that its net income increased sharply from the previous year, yet its net cash flow from operations declined. Which of the following could explain this performance?

Question 10

Which of the following statements is CORRECT?

Question 11

A security analyst obtained the following information from Prestopino Products’ financial statements:

On the basis of this information, which of the following statements is CORRECT?

Question 12

Other things held constant, which of the following actions would increase the amount of cash on a company’s balance sheet?

Question 13

Which of the following statements is CORRECT?

Question 14

Which of the following items is NOT included in current assets?

Question 15

Which of the following statements is CORRECT?

Question 16

Taggart Technologies is considering issuing new common stock and using the proceeds to reduce its outstanding debt. The stock issue would have no effect on total assets, the interest rate Taggart pays, EBIT, or the tax rate. Which of the following is likely to occur if the company goes ahead with the stock issue?

Question 17

Amram Company’s current ratio is 1.9. Considered alone, which of the following actions would reduce the company’s current ratio?

Question 18

Other things held constant, which of the following alternatives would increase a company’s cash flow for the current year?

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